Published 1 month ago • 6 minute read

Key Components of a Blockchain System

Cryptocurrencies are rising and are viewed by many experts as the future of the financial industry. Statistics show that there are more than 300 million crypto users worldwide. What’s even more impressive is the fact that around 20,000 businesses accept transactions made with these digital assets.

Apart from providing users with several advantages in terms of online payments, a major reason why many are fond of using them is that they are viewed as investor assets, and you can actually make money off them. Research shows that there are more than 100,000 crypto millionaires on a global scale and the number keeps increasing with each passing day.

As you may know, cryptocurrencies rely on the blockchain system. The blockchain is a ledger that contains all transactions made with the digital assets and thanks to the fact that every crypto user plays a role in its continued operation, the blockchain is highly decentralized and thus, viewed as a scam-free platform.

Speaking of the blockchain system, we wanted to provide you with a bit more on it and name its key components. So, without any further ado, let’s start breaking down the details.

Mining

As we just mentioned, a blockchain is a ledger that contains records of all transactions made with cryptocurrencies. Each user can contribute to the stability of the system through the process of mining.

Considering the fact that blockchains are decentralized systems, they rely on their users to keep track of the transactions and update the system every second. That is exactly what mining represents. Through mining, miners are able to record and verify transactions made with cryptocurrencies.

Each recorded transaction becomes a block and is integrated with the blockchain. Think of it this way – if you rent out rooms and want to keep track of your income, the money that you make from one customer is called a block.

On the other hand, the paper that contains all previous customers that have paid for accommodation at your place is the blockchain.

Of course, there is a reward for those that record cryptocurrencies. Through the process of mining, miners are able to earn cryptocurrencies. Keep in mind that each cryptocurrency has a different mining time. For example, the world’s most popular cryptocurrency, Bitcoin, has an average mining time of 10-15 minutes. Ethereum, on the other hand, has a mining period of around 15 seconds.

Cryptography

One of the biggest advantages that cryptocurrencies have in terms of using them as a payment method is the fact that they provide users with a higher level of online security. This is a major benefit, considering the fact that in 2021, 57% of cybercrimes were actually online frauds.

Here’s how blockchains provide you with top-level security. They are powered by a security method called cryptography or also known as cryptology. Thanks to this method, your real identity remains hidden, and it is not revealed until the transaction has been completed.

In doing so, you are provided with a certain level of online anonymity. Now, that doesn’t mean that your identity is fully off the grid, but the security measure is far greater than the one of regular payment methods such as credit and debit cards.

Node

Nodes are one of the most important parts of blockchains. As we’ve already explained earlier, blockchains contain countless blocks of transactions. That means that they are huge. And of course, they contain a lot of data. This data needs to be stored somewhere and that is exactly where nodes step into play.

Big servers, laptops, computers, etc., can serve as a node. They verify the signatures and add new blocks to the network. Nodes can be offline or online. Speaking of nodes, it is worth sharing some details about master nodes.

Unlike regular nodes, they do not add new blocks to the blockchain network. Instead, they make changes inside the network. Considering the fact that their main goal is to maintain an equilibrium, master nodes take more memory than standard nodes.

E-Wallets

When crypto users get their hands on a certain digital asset, whether that is a stablecoin, NFT or highly volatile cryptocurrencies, they need a safe place where they can store them. That is exactly what e-wallets represent. They are your digital storage units and safe havens for your cryptocurrencies.

There are two types of e-wallets – hot and cold. Hot e-wallets are actually cloud-based storage units, and their main advantage is that you can access them from any place and from any time, just as long as you have a stable connection to the Internet.

On the other hand, cold e-wallets are hardware units that store your digital assets offline. They do not provide you with the same flexibility as hot wallets, but considering the fact that they are offline, many consider them to be more secure.

Of course, both types of e-wallets have their advantages and disadvantages. Determining which type prevails comes down to personal preferences. Some might consider hot wallets to be better as they provide crypto traders with more flexibility, while some are looking for greater security and opt-in for cold wallets.

Blockchain API

Finally, we have APIs. API is a short abbreviation of Application Programming Interface, and its main purpose is to serve as a tool in which pieces of software communicate with themselves. There are several benefits that come with using blockchain APIs, including:

  • Better security
  • A better system of processing
  • Ownership and collaboration
  • Unification
  • Chain management

Considering the fact that the main purpose of a Blockchain API is to create trust, it is vital for blockchains to use this service from reputable operators. One of those operators is Chaingateway.io. This platform helps bridge the gap between blockchain and the real world. It has plenty of great features. First off, it is very cheap to use and it is universal.

Moreover, this Blockchain API is very secure as every transaction needs a password/private key. Chaingateway.io constantly updates and fixes buts, which means that its platform is always stable and up to date. Finally, the Chaingateway.io blockchain API is compatible with most stablecoins and works with ERC721, TRC10 and ERC20 tokens.

Final Thoughts

There’s no denying the fact that cryptocurrencies are revolutionary assets, and they are powered by a unique system – the blockchain. It is hard to determine what the future holds for them as every country regulates them in a different way, but it is safe to say that they have come a long way.

Blockchains are a masterpiece in terms of security and decentralization and that is the reason why so many people are fond of them. They are not controlled by any centre and in doing so, they provide users with a lot of trust and reliability. Its processes, such as nodes and APIs (TRON API, Ethereum API, etc.) make the network extremely effective.

The reliability of the network is one of the reasons why many believe that blockchains will continue to expand in the future and be accepted by a lot more people from across the world.

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